Thursday, July 05, 2012

The Importance of Place

Charles Kenny writes for Businessweek on the importance of place: Indian workers making Big Mac earn much less (one seventh) than US workers, even when specified in terms of Big Macs--in other words, how many Big Macs can a McDonald's employee buy with her hourly wage.  From the piece:
Why do people in the U.S. earn so much more doing the exact same jobs as people in India? One reason is infrastructure: physical infrastructure such as (comparatively) good road and electricity networks, alongside economic infrastructure including a (somewhat) robust banking system. Institutions such as a (passable) set of commercial laws and (not completely capricious) regulatory regimes are another factor. The higher quality of these public goods allows the same amount of effort by the same quality employee to create considerably more value in the U.S. than in India.
 As your typical government-loving liberal, I hasten to point out the factors Kenny refers to are based on government.

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